Have you ever tried the envelope system?
I have read a lot of personal finance books and something that I have seen mentioned more than once is the “envelope system.†If you have never heard of this before it is a pretty simple concept really. It kind of seems like a lazy budget, you can see if you agree.
The basic idea of the envelope system is that you decide how much you need to spend on say groceries then get that much cash and put it in an envelope marked as such. And for the entire month all of your grocery expenditures must come from the cash in the envelope. If you get to the end of the month and the envelope is empty you fail.
Okay, so you don’t fail but the object is to not spend more than what is in the envelope. I guess it is also a practice in restraint since you won’t be able to make any impulse buys cause you’ll drain that envelope dry before you know it! I think there is also the mentality that with it being cash that you are more aware of spending it.
Why did I bring this up?
Well, I am making a half-hearted attempt at doing it this month. You see, since selling all of my crap for my move I am left with a lot of cash in my wallet. I do all of my banking with ING so I am kind of stuck with the cash.
The way I see it, this is a good way for me to make sure that I don’t just spend the cash in small increments here and there without knowing where it all went at the end of the month. Plus I think it will making bill paying easier as I know I won’t have to worry about grocery money in the checking account.
All in all I think it will be a good thing, but I’ll let you know how it turns out.
January 30th, 2008 at 1:47 pm
That totally doesn’t work for me… I tried it once I think, but I ended up sticking to Excel to manage my money virtually, and have some “mad money” bills in my wallet just in case… max, $100.
January 30th, 2008 at 4:17 pm
I don’t have a lot of luck with the envelope method in terms of using the envelopes for ALL my budgeted categories. And I was always afraid I would lose my envelopes and be out cash. Plus I still made “impluse” buys, envelope or not.
If you are just using the cash for your grocery money, you should be fine. You just have to try it and see if it works for you.
February 12th, 2008 at 5:11 pm
I actually seem to spend MORE with cash. When I have to save the receipt and put it into my checkbook register/program, then I then to limit my impulse purcahses. With cash, I can never remember what I spent it on.
You may have to try both the envelope and buget spreadsheet/quicken, etc to see which one gives you more control.
February 17th, 2008 at 2:09 pm
[...] with issues asks, “Have you ever tried the envelope system?” If so, she wants to know if it worked for [...]